Romans fact-checks Trump's economy claims

CNN's Christine Romans breaks down what factors are boosting economic growth under President Trump and whether or not they are sustainable.

Posted: Aug 2, 2018 7:09 PM
Updated: Aug 2, 2018 7:09 PM

For years, many Republicans and anti-tax advocates have pushed for a change to the way that investment taxes are calculated.

They may get their wish. Steven Mnuchin told the New York Times that the administration is considering whether it can use its regulatory powers to let investors account for the effect of inflation when calculating how much their investments have grown. Treasury is evaluating the economic impact and the process through which it can be achieved, according to a Treasury spokesperson.

When investors sell stocks or other assets subject to capital gains, they are taxed on the difference between what they receive for the sale and what they paid for it originally. That tax rate is usually 20%, which is lower than the rate people are taxed on their income.

By adjusting capital gains to adjust for inflation, the White House could cut the tax bills for the nation's wealthiest investors by billions of dollars a year.

For example, if an investor bought $100,000 of stock in 1987 right after the stock market crash that year, that stock could easily be worth about $1.4 million today. The tax would be calculated on the $1.3 million gain, which would mean the investor would owe more than $250,000 in capital gains taxes if he or she sold the stock. But adjusting for inflation, a process known as indexing, the original $100,000 cost of the stock would be estimated to be more than $200,000, saving the taxpayer more than $20,000 in taxes.

All of those savings would add up. The lack of indexing increased tax collections by $34 billion in just the most recent fiscal year, according to an estimate cited by the Congressional Research Service.

The sale of stock that would otherwise not take place would lead to some increase in tax collections should indexing be put in place. But even with those additional sales, the net effect of indexing would be a $102 billion reduction in tax collections over a 10-year period, according to a study at the University of Pennsylvania Wharton School of Business.

That study estimated that 86% of that benefit would go to the nation's wealthiest 1%, with more than 60% going to the top one-tenth of 1%.

Households with income of more than $500,000 a year are in the top 1%, according to the IRS.

Larry Kudlow, who joined the administration as director of the National Economic Council in March, is a long-time advocate of the president taking unilateral action to index capital gains. And conservative groups such as Americans for Tax Reform led by Grover Norquist, also have long advocated presidential action to index capital gains. Mnuchin told the Times the Trump administration is considering whether to take unilateral action -- without waiting for Congress to act.

"If it can't get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we'll consider that," he told the paper.

But in 1992 the Treasury Department under Republican President George H.W. Bush looked at whether they had the power to index capital gains and decided it would take Congressional action to make the change. Although such legislation would have substantial support among Congressional Republicans, including by Kevin Brady, chairman of the House Ways and Means committee which writes tax bills, passing such a change through Congress could be extremely difficult since Democrats have enough seats in the Senate to block such a move.

Advocates of the change argue it would give a fresh jolt to economic growth by freeing investors to sell assets they are holding because of the tax bite they would face. But a report from the nonpartisan Congressional Research Service in July questioned that claim.

"It is unlikely, however, that a significant, or any, effect on economic growth would occur from a stand-alone indexing proposal," the group said in its report.

Mississippi Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 96032

Reported Deaths: 2894
CountyConfirmedDeaths
Hinds7110159
DeSoto556559
Harrison385374
Jackson348670
Madison329788
Rankin329377
Lee271468
Forrest247872
Jones247579
Washington223872
Lafayette217339
Lauderdale2049125
Bolivar184066
Oktibbeha177850
Lamar170035
Lowndes156958
Neshoba1566104
Panola147129
Sunflower146546
Warren140550
Leflore140481
Pontotoc126616
Pike123451
Monroe122868
Copiah118433
Scott117427
Coahoma115528
Holmes109659
Marshall109517
Lincoln109053
Grenada108336
Yazoo105930
Simpson103346
Union99724
Tate98737
Leake95338
Adams93837
Wayne90021
Pearl River88353
Marion85935
Prentiss85517
Covington82022
Itawamba81521
Alcorn80311
George77113
Newton77024
Tallahatchie77021
Winston73819
Tishomingo68238
Chickasaw67924
Tippah66917
Attala65925
Walthall60026
Clay59218
Clarke58746
Hancock58222
Jasper57315
Noxubee54816
Smith53215
Calhoun51512
Tunica48615
Claiborne46316
Montgomery46120
Lawrence43313
Yalobusha43314
Perry42319
Humphreys37715
Greene37517
Quitman3735
Stone37112
Jefferson Davis34111
Webster33813
Amite32910
Carroll31612
Wilkinson30518
Kemper28915
Sharkey26613
Jefferson2439
Benton2263
Franklin1923
Choctaw1856
Issaquena1043
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Alabama Coronavirus Cases

Confirmed Cases: 134231

Reported Deaths: 2357
CountyConfirmedDeaths
Jefferson19572348
Mobile13320292
Montgomery8811183
Tuscaloosa8586117
Madison782078
Shelby592349
Lee588759
Baldwin545650
Marshall393343
Calhoun349942
Etowah343945
Morgan327328
Houston280221
Elmore265947
DeKalb240620
St. Clair230835
Walker230683
Talladega214628
Limestone208820
Cullman189020
Dallas178326
Franklin176729
Autauga175725
Russell17573
Lauderdale169833
Colbert164126
Blount160815
Escambia160324
Chilton156431
Jackson156011
Covington138527
Dale135844
Coffee13206
Pike119410
Chambers116142
Tallapoosa115685
Clarke108916
Marion95729
Butler91639
Barbour8737
Winston73812
Marengo71620
Pickens65614
Lowndes65327
Bibb65210
Randolph64213
Hale63428
Lawrence61623
Geneva6074
Cherokee60313
Bullock59914
Monroe5848
Clay5797
Washington55613
Perry5416
Crenshaw53632
Conecuh53511
Wilcox53111
Henry4935
Macon48119
Fayette4508
Sumter43519
Lamar3662
Cleburne3646
Choctaw34912
Greene30315
Coosa1683
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